Chris Lau - Seeking Alpha

Tuesday, August 31, 2010

Lessons on LTCM
Continuing with the MBA lecture series with Warren Buffett, Buffett discusses Long-Term Capital Management (LTCM), a fund run by very, very smart people, but which collapsed in 1998. LTCM needed to be rescued, after a chain reaction of panic resulted first with Russia defaulting on its debt.

With respect to the managers of LTCM, Buffett comments:

To make money they didn't have and didn't need, they risked what they did have and did need... and that's foolish.(Re-enforced)

If you risk something that is important to you, with something that is unimportant to you, it just does not make any sense...I don't care if the odds are 100:1 that you'll succeed, or 1000:1 that you'll succeed.

Things to know: Buffett owned Dairy Queen and held a position in Coca-Cola.

Tuesday, August 24, 2010

In the first of a series of videos with Warren Buffett at an MBA school, Buffett discusses the kinds of people to choose for hiring. Intellect, Energy, and Integrity are important, but what is the type of person to choose in a leadership role?

The person to choose for such a leadership role would be one whom you respond the best to.

The person to "go short on" (to bet against) would be the person who had a quality that turned you off. Ego and dishonesty are examples.

How to Be Admired

The qualities you choose and that which you do not want are traits of your choosing. Behaving like those whom you admire is a way you can be admired too. The habits you choose govern what you become:

"The change of habit is too light to be felt until it is too heavy to be broken."

When it comes to finance and investing, quality of management through leadership must be assessed, almost before anything else (although balance sheet analysis might come first). Shareholders would not want a company run by liars, as written in this article from The Economist (How to tell when your boss is lying - It's not just that his lips are moving).

Thursday, August 05, 2010

Jeffrey D. Saut, Raymond James & Associates, compared the positive performance of major markets last month to that of happiness. This introduction is worth repeating (ed: addition of paragraphs).

"Don’t Worry, Be Happy"
“Happiness is contagious, spreading among friends, neighbors, siblings, and spouses like the flu, according to a large study that for the first time shows how emotions can ripple through clusters of people who might not even know each other.

The study of more than 4,700 people, who were followed over 20 years, found that people who are happy, or become happy, boost the chances that someone they know will be happy. The power of happiness, moreover, can span another degree of separation, elevating the mood of that person’s husband, wife, brother, sister, friend or next-door neighbor. Your emotional state also depends on the choices and actions and experiences of other people, including people to whom you are not directly connected.

Happiness is contagious.

One person’s happiness can affect another’s for up to a year, the researchers found,and while unhappiness can also spread from person to person, the ‘infectiousness‘ of that emotion appears to be far weaker. Laughter can trigger guffaws in others; seeing someone smile can momentarily lift one’s sprits.

But the new study is the first to find that happiness can spread across groups for an extended period of time. The findings provide striking new evidence of the power of social networks, which should have implications for public policy.

Happy people tend to be better off in myriad of ways, being more creative, productive and healthier. Some experts praised the study as a landmark in the growing body of evidence documenting the influence of personal connections and the importance of positive emotions. ‘It’s a pathfinding article,’ said
Martin E. P. Seligman, a University of Pennsylvania psychologist. ‘It’s totally original and the findings are
striking.’”
. . . James Dines, The Dine’s Letter

“Happiness” . . . what a novel concept! As the brilliant strategist James Montier writes:
“If you are after specific investment advice, stop reading now.” He goes on to note:

“Don’t equate happiness with money. People adapt to income shifts relatively quickly; the long lasting
benefits are essentially zero.”

“Exercise regularly.

“Have sex (preferably with someone you love). Sex is consistently rated as amongst the highest generator of happiness.”
“Devote time and effort to close relationships. Close relationships require work and effort, but pay vast
rewards in terms of happiness.”
“Pause for reflection, meditate on the good things in life. Simple reflection on the good aspects of life helps prevent hedonic adaptation.”

“Give your body the sleep it needs.”
“Don’t pursue happiness for its own sake, enjoy the moment. Faulty perceptions of what makes you happy, may lead to the wrong pursuits. Additionally, activities may become a means to an end, rather than something to be enjoyed, defeating the purpose in the first place.”
“Take control of your life, set yourself achievable goals.”